Original scientific paper
https://doi.org/10.1080/1331677X.2018.1442233
Accounting for monetary and fiscal policy effects in a simple dynamic general equilibrium model
Ming-Jen Chang
; University of Liverpool, Liverpool, UK; National Dong Hwa University, Hualien, Taiwan
Meng-Chao Liu
; International Banking Department, Sunny Bank, Taipei, Taiwan
Abstract
We construct a simple dynamic general equilibrium model to examine
several important macroeconomic issues in the study. The active
monetary and passive fiscal (AM/PF) policy may induce the raising of
both interest rates and inflation rates. We find that there is a positive
relationship between shopping time and inflation because higher
inflation causes agents to reduce their money holdings so as to take
more time for shopping. In addition, shopping time and output move
in opposite ways due to the fact that higher shopping time results in
lower working hours, so as to decrease production. Finally, this model
fails to capture liquidity effect, but rather identify price puzzle through
an expansion of monetary policy shock.
Keywords
Fiscal policy; monetary policy; shopping time
Hrčak ID:
206074
URI
Publication date:
3.12.2018.
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